When people hear about fashion, they expect a guru or a designer wearing funny clothing. This is part of it, but some would argue that the main competitive advantage of international retailers, such as Zara, is Operations. In fact, Zara doesn´t have a best-in-class designer like Gucci has Alessandro Michele. Inditex best-in-class business model is based in a vertical integrated system where operations and logistics, an agile Supply Chain, are as important as trends identification and speed to market.
Operations in Fashion are even more complex than in other industries because of the uncertainty of demand, seasonality, different sizes (and patterns across geographies), local tastes, amongst many others. Supply Chain became even more complicated when some fashion retailers started to produce more than two collections a year, what we call Fast-Fashion. Or more clearly, since Zara. Even luxury brands are trying to adapt to fast fashion, looking for a way to reduce the risk of obsolescence due to seasonality and fast changing trends. Omnichannel is even putting more pressure on supply chain and the future of fashion will depend on the capacity of adapting to these new ecosystems, a mix of offline and online.
Regarding this topic, I had the chance to interview one of the most reputed Fashion Operations experts Worldwide: Victor Martínez de Albéniz.
Victor is 39 years old, engineer and PhD in Operations Research from MIT. Professor at IESE Business School since 2004, he is also an active researcher in fashion operations, collaborating with many retailers like H&M, Desigual, Privalia, and others. He still plays handball, one of his hobbies.
The Fashion Retailer: Why did you decided to specialize in Fashion operations?
Victor Martínez de Albéniz: I started my career working on supply chain: production, distribution, etc. I did a few projects of fashion distribution and sourcing and found it fascinating: a lot of the insights are coming from the creatives of the company! So here was a difficult intellectual challenge: how to best combine the intuitions of the creative profiles with the hard, data-driven method that we engineers are good at.
TFR: What does an operations manager needs to know differently compared to one 15 years ago? What are the skills needed today?
V. M. A. : Looking much more often at hard data: sales volumes, trends, breakdowns by product category, by channel, etc. So management by gut feeling (expedite this order, increase order quantity of that shirt, etc) will need to be based on hard evidence. In my opinion, the ideal operations manager needs to still have the decisiveness for quick and effective action, but also know analytics to find the right information for good decisions.
“Operations Managers will need to adapt to analytics and looking at hard data”.
TFR: How luxury companies can adapt to the threat from mass-market retailers that are excellent in their operations while adapt faster to e-commerce?
V. M. A. : Knowing customers better and being able to offer the right product at the right price. This sometimes requires reacting fast to changes in the market, so a fast fashion approach can be useful.
TFR: Are operations and online destroying the art of fashion? (luxury companies are complaining that fashion shouldn´t be a fast-food product, ready to consume or collections shouldn´t be based on data-driven insights)
V. M. A. : Indeed luxury brands aspire to define what people wear. This is a great objective but unfortunately they also need to collect revenue to sustain their business. So if they are creative enough to define a trend, they will be fine; if not, they are no better than mass market followers.
TFR: How digital systems and manufacturing 4.0 are impacting in the fashion industry? (3d printing, social sensing, machine learning…)
V. M. A. : Big possibilities for analytics and more effective retail execution. At the moment 3D printing is too expensive – I don’t think it will take off.
TFR: You wrote the case of FARFETCH at IESE. What do you feel is/are the main factors that explain Farfetch´s successful case?
V. M. A. : Farfetch is a great success story, a very profitable unicorn. They virtually pool luxury fashion inventory from independent stores and sell it at full price! And they do not need to take any risk on inventory. The challenge is that to grow they need to recruit new stores, which is difficult because this channel is getting smaller.
TFR: Do you think Amazon will compete directly in luxury fashion?
V. M. A. : They can. They have the technology to detect what customers want. They could replicate the Farfetch model. Perhaps they should acquire Farfetch?
“Amazon can compete in luxury fashion. They have the technology to detect what customers want and could replicate the Farfecth Model”- V. M. de Albeniz.
TFR: What are the key assets a fashion retailer must have in order to be omnichannel?
V. M. A. : A clear fulfilment model, where the inventory is located in the right place (DC or store). And information systems to provide visibility over inventory locations.
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